When you are setting up the data source you should choose ODBC as the connection type and then select the text driver from the connection string lookup button.
In the ODBC Text driver setup window you will want to uncheck the Use Current Directory option and then hit the Select Directory button and choose the folder that contains the text file you want to use as the data source.
Next, hit the Options button to expand the setup window and then hit the Define Format button. From this window you can choose your file, determine whether it has headers or not with the option box, and also choose the delimiter. If you choose the Custom Delimited option you can enter the pipe character in the field below it.
Once you have selected your file and determined the header and delimiter options, you can hit the Guess button at the top right to have the driver determine what columns are in your source file and their data types. Once you have everything configured properly from these windows, you can close out of them and continue with your map setup as normal.